If you thought socially invested funds were the only game in the agenda-drive investing game, you have not been paying attention. A new U.S.-based wealth management firm is extending the concept of agenda-driven investing to whole new level, so-called "patriotic" investing.
Arlington-Virginia-based Freedom Capital Investment Management has drawn press attention lately for being the first investment manager to extend the concept of mission-directed capital investing beyond traditional “liberal” bounds.
The fund, dedicated to what the firm calls Patriotic Responsible Investing, advances the concept of agenda-based to “invest capital profitably in opportunities that strengthen America and its allies” through investments energy independence, American military security, Second Amendment rights, North American agricultural independence, weapons and munitions, cyber-security, energy extraction and infrastructure, as well as the financial intermediaries that serve target sectors. That is, these are investments that “provide stability and offer opportunity and freedom for America and its allies.”
Move over liberal-biased investment fund managers, the politics of invesitng have taken a new turn.
Established in March 2014 Freedom Capital has recently been the subject of a couple of new reports. The stories reflexively, it seems, lump the fund in with the Tea Party movement in the United States. "I don't think that's what we intended. Media takes a more dramatic view,” says McClure in an interview with Wealth Professional magazine
The fund’s CEO goes on to explain how the idea for the fund came out of a simple recognition of a business opportunity. “We did research. We found that agenda-funds capital space is $4 trillion today. There is massive demand for capital with an agenda,” says McClure.
But he also found that the existing agenda-based funds reflected a liberal bias. He thinks there are many investors out there ready to extend that concept beyond typical feel-good notions like no tobacco or coal holdings. "SRI is noble on the face of it. But there are people who would agree with our perspective. We think there is a massive demand for a different,” says McClure.
As the company’s website says: “Freedom Capital Investment Management [aims to] educate investors about the stronghold that the liberal left has on the management of US household wealth. It is the first to offer a proactive patriotic investment alternative.”
Recent divestment campaigns around coal and firearms spurred McClure to action.
Famously, Stanford University divested itself of coal holdings and pressed the managers it contracts with to do the same. McClure was mystified about the base impracticality of such a move. “We watch these situations like Stanford and scratch out heads…Stanford wants to divest from all coal-related industries, and has suggested it would like to see its external managers to the same. Well, coal is 40% of the electricity in this country. If these initiatives succeed, an equity market for this and other energy industries would not exist. We can debate the long-term effects of coal; but no one can debate that we need heat and light, and that without a coal industry tomorrow, there would be anarchy. I don't think Stanford wants to see the coal industry collapse. But I would rather have electricity and food, and we think there are others who think that as well."
The SRI campaign against firearms manufacturer Remington was another example of the “negative impact social agendas can have on longstanding American companies engaged in legal and patriotic business.” To McClure investors' attempts to force a fire sale or choke off capital is bad for a company that provides tools to the United States military protecting the country. “This is a patriotic investment. This company supplies our military, as well as the Canadian military. These are the forces that keep us safe. We think the disappearance of Remington is a bad idea. If we want our society to continue to function as they are, these are things that need capital.”
The fund is based in Arlington Virginia, and many of the new and incoming employees will have experience in homeland defense, another sector. But the company has mandates beyond firearms, defense, coal and munitions. Another key sector is North American agriculture and, interestingly, the small and mid-sized business sector.
As McClure rightly points out since 2008 the number of IPOs in the mid-sized company space has fallen off. Only large corporations are attracting funding these days. As text on the fund’s website points out: “The dearth of capital available to the small and mid-sized business is choking a sector responsible for a massive share of the American economy...Mutual funds hold $13 trillion of US investable capital, and in recent decades, have been dominated by big market capitalization companies. The size of the average mutual fund is $1.5 billion, which makes it nearly impossible for mutual funds to focus on small- and middle-market opportunities." Accordingly, “Our nation's small businesses are falling victim to the success of massive fund complexes that are daily gaining more control of our investable dollars. Freedom Capital recognizes the need for high-quality capital partners and brings institutional quality underwriting and structuring experience to the small and middle markets.” Or, as McClure puts it, “A big place capital needs to flow into is the small and mid-zee business market. That's something we think important.” Hard to argue with that.